Kalshi Running ‘Shadow’ Sportsbook, Claim Class Action Plaintiffs
Posted on: January 19, 2026, 05:00h.
Last updated on: January 18, 2026, 10:37h.
- Some of the plaintiffs have problem wagering habits.
- They believe the prediction market operator attempts to extract profits from gambling addicts.
- The plaintiffs call Kalshi a “shadow” sportsbook that’s defying state gaming laws.
A group of Kalshi clients, some of whom admit to having problematic betting behavior, brought a class action suit against the prediction market giant, claiming the company intentionally preys on vulnerable bettors.
In a suit filed last week in the US District Court for the Southern District of New York, Alexander Hallman, Jeremy Kravetz, Daniel Greenberg, Nathaniel Bee, and Abhijn Gutta contend Kalshi is operating as an “illegal and unlicensed sportsbook” under the cloak of a prediction market. Their legal complaint also states Kalshi claims its sports event contracts aren’t sports bets, but rather designated contract markets (DCMs).
This is false. In substance and operation, Kalshi is—and continues to be—an illegal, unlicensed (or ‘shadow’) sportsbook masquerading as a ‘prediction market,’” according to the document. “By invoking federal commodities regulation as a pretext, Kalshi unlawfully offers sports wagers in states where sports betting is prohibited and avoids state licensure, taxation, and consumer‑protection requirements in states where sports betting is legal.”
As has been noted in other cases against the prediction market operators, counsel for the class action plaintiffs note Kalshi has a history of flip-flopping on its status as a sportsbook, pointing out there was time when the company acknowledged sports event contracts weren’t permitted by the Commodities Futures Trading Commission (CFTC).
Plaintiffs Say They Were Duped by Kalshi
Plaintiff Hallman, a Colorado resident, allegedly bet and lost thousands of dollars on sports derivatives on Kalshi, and after those losses, took steps to block Kalshi advertisements on various social media platforms, but he continued seeing the ads.
Plaintiff Kravetz, a Tennessee resident that admits to being a problem bettor, is said to have placed $25 million worth of sports wagers on Kalshi and Robinhood, the latter of which has a partnership with Kalshi and features an expansive menu of sports event contracts. Counsel for the class Kravetz became a client of Kalshi because he thought it was a safer alternative to traditional sports wagering and later tried to self-exclude himself from the platform with no success.
Bee, one of the other plaintiffs, used Kalshi because the company marketed itself a legal alternative to sports betting in California — a state that doesn’t permit that form of wagering.
“Plaintiff viewed ads for Kalshi on social media. Relying on Defendant’s representations that sports betting is legal in California, Plaintiff wagered and lost money on Kalshi sports bets. Had Plaintiff known that Kalshi was operating an illegal sports betting operation he would have never used Kalshi to place sports bets,” according to the complaint.
Lawyers Say Kalshi Knew It Was Illegal to Offer Sports Contracts
Counsel for the class point out that when Kalshi took the CFTC to court in 2024 in an effort to offer event contracts on the 2024 presidential and other elections, the company overtly stated sports derivatives were prohibited by the CFTC. It wasn’t long after the company commenced offering those contracts, serving as a prelude to a broader sports push buoyed by the 2025 football season.
The attorneys note that an October 2024 “ask me anything” session on Reddit led by Kalshi co-founder Tarek Mansour, the Kalshi leader confirmed the company won its 2024 CFTC case because it successfully distinguished between election event contracts and sports betting. Yet, the company entered the sports wagering realm soon thereafter, according the class action lawyers.
“In doing so, Kalshi made false and misleading statements to users who signed up for Kalshi’s sportsbook, deceiving them into believing that Kalshi has ‘legalized sports betting’ and users could do so ‘in all 50 states,’” according to the complaint.
The legal document also points out that Kalshi has engaged in a spate of sports-related advertising, focusing on states, such as Georgina, Minnesota, and Texas, where that form of wagering is barred.
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